BBBEE: BROAD-BBEE TRUSTS ARE GENUINE

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Dear employer

There has recently been some controversy surrounding the validity of a Broad BBEE trust as an accepted vehicle for empowerment in terms of the B-BBEE Act.

The BEE Commissioner has previously come out strongly against BEE trusts indicating that, in her view, these trusts are shams as they do not truly adhere to the requirements of having “black owners”. The Commissioner’s utterances were, seemingly, not aimed at trusts in which shares are vested in specific individuals, but rather at trusts where the shares are vested in employees in general or in the trust itself, which then distributes benefits, e.g. bursaries, to beneficiaries.

These trusts, according to the Commissioner, do not qualify, as she required individual ownership and dividend flows to individuals as criteria for BEE recognition.

This view, however, is not shared by the Department of Trade, Industry and Competition (DTIC). In a recent statement by the Minister of the DTIC, it was stated that:

• where a shareholding is vested in perpetuity in hands of employees, that properly qualifies for BEE rating in terms of the scorecard; and
• that broad-based trusts that hold equity are the pioneers of BEE and should be recognized appropriately.

It, therefore, seems that, according to the DTIC, all three of these models are acceptable BEE vehicles for ownership and it is anticipated that the DTIC will issue a notice in this regard in due course.

We will keep members abreast of developments in this regard.

Regards
Jaco Swart
National Manager

NEASA 24/7 NATIONAL HOTLINE: 086 016 3272
legalhotline@neasa.co.za
(please have your membership number at hand)

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